On 18/02/2021 the Cyprus House of Representatives has enacted the amending law on the Prevention and Suppression of Money laundering and Terrorist Financing Law of 2021 (the "AML Law") transposing at a national level the 5th Anti-Money Laundering EU Directive 2018/843 (the "AMLD") which imposes minimum standards to the Member States for the prevention of the flow of illicit funds and terrorist financing activities.
Under the implementation of the AMLD at a national level, it has been decided to establish central registries of ultimate beneficial owners (the "UBOs") which are set to contain information on the physical persons who ultimately own or control companies or other legal entities, legal bodies, trusts or other legal arrangements.
In accordance with the provisions of the AML Law, the following registers as to ultimate beneficial owners must be established:
- the Central Registry of real Beneficiaries of Companies and other legal entities;
- the Central Registry of real Beneficiaries of legal bodies;
- the Register of express trusts and similar legal arrangements.
B. ULTIMATE BENEFICIAL OWNERSHIP REGISTERS
As per the AML Law, a 'UBO' means any physical person who ultimately owns or controls a legal entity through direct or indirect shareholding ownership of 25 per cent (25%) plus one share.
1. The Central Registry of real Beneficiaries of Companies and other Legal Entities
Companies and other legal entities that have been incorporated in the Republic of Cyprus must ensure that adequate, accurate and current information on their UBOs, including the name, date of birth, nationality, country of residence and extent of the interest held, are kept in their records and submitted to the Registrar of Companies and Official Receiver in Cyprus.
The Central Registry of real Beneficiaries of Companies and other legal entities will be maintained by the Registrar of Companies and the following persons shall have access to this Registry:
- The responsible Supervisory Authority, as defined by Section 59 of the AML Law, the Unit for Combating Money Laundering (the "Unit"), Police, Customs and Excise Department and Tax Department without any limitations;
- Obliged entities* in the context of customer due diligence; and
- The public that will have access ONLY to the following information of the UBO: name and surname, month and year of birth, nationality, country of residence and nature and extent of the beneficial interest.
*Obliged Entities as defined by Section 2A of the AML Law means (i) credit institutions, (ii) financial institutions and (iii) natural or legal persons acting in the exercise of their professional activities which among other include the auditors, external accountants and tax advisors, notaries and other independent legal professionals and company service providers.
The above-mentioned information of the UBOs will be available upon registration and payment of a small fee.
Further, the Competent Authorities (including the Cyprus Bar Association, the Central Bank and CySec), Unit, Police, Customs and Excise Department and Tax Department will have unlimited and fast access to the Registry without notifying the relevant companies of their access.
The obliged entities will have fast access to the Registry in the context of customer due diligence.
In exceptional circumstances, it is possible to provide for exemptions to the access to information in relation to the UBOs, in part or in whole, where that information would expose the UBO to a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation or where the UBO is a minor or is legally incompetent.
The information on the UBOs of the Companies and other legal entities shall be available through the Register maintained by the Registrar and through the system of interconnection of registers for ten (10) years after the corporate or other legal entity has been struck off from the Register.
However, five (5) years after the date of strike off of the Company or other legal entity from the Register, access to such information contained in the Registry will be permitted only in the course of administrative or criminal enquiry conducted by the Supervisory Authority, Unit, Customs Department, Tax Department and the Police.
Announcement of the Registrar of Companies and Official Receiver dated 19/02/2021
The collection of information of UBOs of Companies and Other Legal Entities shall commence on 16/03/2021.
It is emphasized that a grace period of six (6) months for the registration of the information concerning the UBOs in the system has been granted by the Registrar.
Within the following days, the Registrar is expected to publish the regulations for the maintenance and operation of the registry along with a manual on the operation of the system that has been developed for this purpose.
The Registrar of Companies is also expected to revert with an informative seminar on the implementation of the regulations and the mechanisms available to the public.
2. The Central Registry of real Beneficiaries of Legal Bodies
Legal bodies refer to bodies not registered with the Registrar of Companies which include clubs, federations, unions and charitable foundations. Clubs, federations and unions are defined and governed by the Clubs and Foundations and Other Related Matters Law of 2017, No. 104(I)/2017 while charitable foundations are governed by the Charities Law, Cap. 41.
The Charities Law, Cap 41 though, will be rendered soon obsolete, (there is a pending bill as to this issue) and any charitable foundation will need to be registered under the Clubs and Foundations and Other Related Matters Law of 2017.
It is worth noting that charitable trusts, which are those trusts created for a charitable purpose(s), must be distinguished from charitable foundations.
A charitable trust may be also set up as per the provisions of the International Trusts Law provided that it meets the requirements mentioned therein.
Clubs, federations, unions and foundations must ensure that adequate, accurate and current information on their UBOs must be submitted with the General Commissioner.
The General Commissioner (who is the general director of the Ministry of Interior) is appointed as the competent authority for the maintenance of the Central Registry of UBOs of Legal Bodies and the persons who shall have access to this Registry are identical to the ones having access to the Central Registry of real Beneficiaries of Companies and Other Legal Entities.
The information on the UBOs of the legal bodies shall be available through the Register maintained by the General Commissioner and through the system of interconnection of registers for ten (10) years after the legal body has been struck off from the Register.
However, five (5) years after the date of strike off of the legal body from the Register, access to such information contained in the Registry will be permitted only in the course of administrative or criminal enquiry conducted by the Supervisory Authority, Unit, Customs Department, Tax Department and the Police.
3. The Register of express trusts and similar legal arrangements (the "Trusts' Registry")
Following the implementation of the AMLD in Cyprus, CySec is responsible for the creation and maintenance of the Trusts' Registry in which information as to the UBOs of express trusts and other legal arrangements must be included. The exact procedure of maintaining and updating the Trusts' Registry as well as the meaning of 'express trusts' will be provided by CySec through a relevant circular.
Conditions for registration
The registration of express trusts in the Trusts' Registry is obligatory and applies to express trusts of which:
- the trustee is placed or resides in Cyprus; or
- the trustee is placed or resides outside the EU but concludes a business relationship or acquires immovable property on behalf of the express trust.
The registration requirement does not apply to the following express trusts that have been registered in the register of another member state and,
- the trustee is placed or resides in another member state other than Cyprus; or
- in the case there are more than one trustees and the one is placed or resides in Cyprus; or
- the trustee concludes various business relationships on behalf of the trust in various member states including Cyprus.
The application to CySec for the registration of an express trust in the Trusts' Registry must be made by the trustee of the trust by submitting information regarding the trust and its UBOs. The timeframe relevant to the application for the registration of an express trust and the information to be included there in as well as the procedure of registration will be determined by CySec with a relevant circular.
The trustee of an express trust which is administered in Cyprus is obliged to maintain adequate, precise and updated information as to the UBOs of the trust which identify of the following:
- Protectors, if any;
- Beneficiaries or the classes of persons for the benefit of which the trust has been set up;
- Any other physical person who exercises control over the trust through direct or indirect ownership or with other means.
Therefore, the trustee is under an obligation to update and submit to CySec any amendments to the information already submitted to them. The fees payable for the registration and maintenance of an express trust with the Trusts' Registry must be settled by the trustee.
Powers and obligations of CySec
The trustee of an express trust registered in the Trusts' Registry must comply with all requests and/or recommendations of CySec. Pursuant to the AML Law, CySec may:
- Approve or reject an application for registration in accordance with the conditions of the circular;
- Remove a registered express trust from the Trusts' Registry in the event that the conditions for registration are not fulfilled or in the event that the trust is no longer effective;
- Postpone the registration of an express trust in accordance with the conditions of the circular;
- Impose monetary penalties for failure to submit the required information for registration;
- Impose monetary penalties or suspend or delete the registration
of an express trust in the following cases:
- for failure to comply with the provisions of the AML Law or the circulars issued by CySec;
- for submission of false or misleading information or for not disclosing essential information.
Following the removal of a registered express trust for the reasons stated above, CySec is obliged to maintain in the Trusts' Registry information as to the said trust or other legal arrangement and its UBOs for a period of ten (10) years from the date of deletion.
Access to the Trusts' Registry
CySec may grant access to the Trusts' Registry:
- to the Supervisory Authority, Unit, Customs and Excise Department, Tax Department and Police without any limitations;
- to obliged entities for due diligence purposes and identification of their clients upon payment of respective fee;
- to legal or physical persons that can demonstrate legitimate interest in accessing the registry and proving the same through relevant procedure to be implemented, upon payment of respective fee;
- to legal or physical persons in relation to a trust which holds or owns a controlling interest in a company that is not incorporated in Cyprus upon the written request of the said persons and payment of respective fee;
The information accessible to the categories b - d above are limited to:
- The name of the beneficiary;
- The month and year of birth;
- The country of residency;
- The nationality of the beneficiary; and
- The type and extend of the rights they have in the express trust.
Legitimate interest by the applicant is established in the event that the physical or legal person shows that his interest relates exclusively and contributes to the prevention of legalization of income from illegal activities and terrorist financing based on the facts and information, including facts and information for past activities and actions conducted towards this direction, and is decided by CySec case-by-case.
Following an application for access to the Trusts' Registry, CySec may:
- approve application for disclosure or reject it;
- specify the procedures for applying, approving or rejecting the applications, for accessing the Trusts' Registry and procedures as to the type of information for which access will be granted.
Five (5) years after the date of removal of a registered express trust, access to the information contained in the Trusts' Registry is permitted only in the course of administrative or criminal enquiry conducted by the Supervisory Authority, Unit, Customs and Excise Department, Tax Department and the Police.
CySec may not grant access to information in relation to the UBOs of express trusts, in part or in whole, only in exceptional circumstances and following a detailed assessment of the exceptional nature of the facts, if:
- such disclosure would expose the UBO to a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment violence or intimidation; or
- the UBO is a minor or legally incompetent.
The above exception does not apply in the case that application for access is made by:
- obliged entities that are credit and financial institutions;
- by the responsible Supervisory Authority, Unit, Customs and Excise Department, Tax Department and the Police.
Undoubtably, the current reality paves the way to a new era of disclosure and transparency. Guidelines on the registration and application process for accessing the registers and applicable timeframes are expected to be announced by the authorities responsible to maintain each register.
Although companies and other legal entities are required to disclose information on their UBOs, disclosure can be limited in the event that an express trust is included in the company's holding structure. In this case, where a company has a trust as a shareholder and not a nominee it is expected that only the name of the trust or trustee(s) in place shall be included in the Registry of Companies. The details of the UBO of the express trust included in the company's structure shall be submitted only to the Trusts' Registry which, in contrast to the Registry of Companies, is not available to the public unless legitimate interest is proved. Hence, protection on the information of the company's UBO is enhanced without overruling the provisions of the AMLD and AML Law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.